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The Top House Appraisal Tips For Home Buyers And Sellers There are a lot of steps that come with buying or selling a home. One of the routine steps that have to be accomplished is called a home appraisal. When it comes to a home appraisal, this is something that can cause both buyers and sellers to pause for a second. For those who might not know, a house appraisal is where a trained professional will take a look at the fair market value of the home. It is important to understand what happens when a home appraisal is conducted.

Compare The Home To Similar Properties

When a home appraisal is conducted, its value is usually compared to homes in the area that are similar. The value of a home is always determined by what similar homes in the area have sold for recently. This is what the lender is going to look for. For example, if someone is selling a condo, and the value of that condo is going to be compared to other condos in the building that have sold recently. Even though there might not be identical houses in the area, the same process is going to happen for free-standing homes.

Make Improvements To The Home

For those who are going to be selling their home in the near future, one of the easiest ways to drive up the value of the home is to make improvements. If the countertops, floors, or cabinets have not been updated recently, then performing these updates can drive up the value of a home. In some cases, homeowners might be able to get a bigger increase in the value of their home than the amount of money they spent on the improvements.

Get A Second Appraisal

In some cases, home buyers might not like the appraisal that came in on the home. In this case, they might be able to challenge this first appraisal by getting a second appraisal. Even though this might cost a bit of money, if the home comes back at a significantly reduced cost, then there might be opportunities for the buyer to renegotiate the price of the home. Everyone wants to make sure they are getting a fair deal when a home changes hands.

5 Options To Consider When Your Appraisal Comes In Low Yikes! You are set on buying the home that you picked out and the appraisal comes back at a lower amount than the amount needed for the home loan to be approved. What do you do? After you calm down your significant other and then take three deep breaths, here are some options to consider.

Request A New Appraisal

Appraisals are only one person’s professional opinion. There are rules that must be followed when making an appraisal; however, there is still some flexibility in how to apply the rules. Check the comparables (also called “comps”) that the appraiser used as the basis for setting the appraised value.

There usually have to be at least three houses that are a similar size, similar age, have a similar condition, and are located in a similar neighborhood. If the home that you want to buy just had major renovation with a lot of work done on it, the appraiser may have missed this and should add more to the appraisal for the home having a better condition than the comparables.

Check to determine if any of the comparables are wrong. For example, if the appraiser uses a home that is in poor condition that may cause the appraisal to be too low. When there is another choice of a home in a better condition, which is more similar to the one being sold, the appraisal might be higher.

If you find problems with how the appraisal was done, request a review from your lender and see if they will allow you to pay for a second appraisal. Getting a new appraisal with a higher value is the easiest way to fix this problem.

If that does not work, then you can try these other options:

Negotiate With The Lender

Some lenders may cooperate with a loan restructuring if you qualify for a program with a higher loan-to-value (LTV). This may also require private mortgage insurance (PMI) if your loan amount exceeds 80% of the appraised value of the home. Working with your trusted mortgage professional can lead to unexpected options to get your home purchase completed.

Negotiate With The Seller

Trouble may come up if an appraiser cannot find comps that meet the selling price of the home. This may be caused by the home having unique qualities, a market that does not have other homes like it, or possibly that the sale price is more than the home is actually worth. If the price of the home is actually too high based on the appraisal, the seller might lower the sales price in order to keep the transaction together.

Increase Your Down Payment

If the amount of the difference is small and you can cover it, you can still proceed by taking a lower amount for the loan and adding money to your down payment to make up the difference.

Find Another Home To Buy

Your purchase offer should be subject to obtaining financing. If the appraisal comes in low and that prevents you from obtaining financing at the original sales price, you likely will be able to cancel the purchase agreement without penalty and search for a new home.

Your trusted home mortgage professional is well-versed in these types of issues and ready and willing to assist you with your successful home purchase transaction.

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